IPOs in the Wake of Facebook
Jennifer is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Since Facebook, several companies have engaged in IPOs. Analysts have been watching for two very important things: What is the level of investor confidence and what impact has the Facebook debacle had on Wall Street? Ever since Facebook's IPO fail, the investor rush to buy into IPOs has cooled considerably.
This wait and see approach has resulted in companies being slow to proceed with IPOs. What is interesting about some of the stocks that did come to market is that most of them are brick and mortar establishments that investors could sink their teeth into and that have solid branding behind them.
CKE Restaurants which owns fast food chains Hardees and Carls Junior and has more than 3,000 locations was a highly anticipated IPO and was estimated to trade at between $14.00 to $16.00 per share.
Bloomin' Brands (NASDAQ: BLMN) formerly known as OSI Restaurant Group is returning to the market after being taken private in 2006. The company was named for the Bloomin' Onion served at its Outback Steakhouse Restaurants. In a slow economy with families looking for less expensive dining options, coming to the market at this time is a smart move. It was opined that investors would see CKE as the better investment however, since their restaurants (Hardee's and Carls' Junior) sell food at a lower price point.
Another entry was Manchester United (NYSE: MANU) priced at $14.00 per share. This was actually below the original forecast by underwriters. The 134 year old club sought to raise upwards of 334 million to pay off lingering debt.
Debt collection agency Performant Financial Group (NASDAQ: PFMT) traded with shares priced between $12.00 to $14.00 each. Performant helps government and private companies recover delinquent loans. I thought that this company would be a sure bet in a stagnant economy, but after further digging, I learned that Performant's main client is the federal government, which may have given many investors pause due to lack of diversification of clientele.
What do all of these companies and IPOs have in common?
Heightened scrutiny and investor push back. Investors ran to the Facebook (NASDAQ: FB) IPO like moths to a flame thinking it was going to be the big one, only to be disappointed. Between the declining share prices and a less than stellar earnings report, Facebook has proven to be a cautionary tale to potential investors.
Manchester United priced shares at $14.00, below the initial estimate of $16.00 to $20.00.
Performant Financial priced its shares at $9.00, lower than the initial estimate of $12.00 to $14.00.
Bloomin' Brands, which has a well known brand through its Outback Steakhouse Restaurant priced its shares at $11.00, lower than the initial $13.00 to $15.00 range.
CKE restaurants actually postponed its IPO. This was unexpected, but after noting that McDonald's (NYSE: MCD) a leader in the fast food industry had a lackluster sales report, it was decided that it would be better to wait.
Potential investors before diving in should ask themselves, what is the purpose of this IPO? Really research the company. What is the long term strategy and vision of the company, does the company have a solid history or is it the latest "in" thing, pore over any documents that have been made public. Manchester United is a perfect example, executives stated again and again that the purpose of the IPO was to get rid of lingering debt, so that is why the IPO is beneficial to Manchester, but how is it beneficial to potential investors?
This much slower approach has led to quiet IPO weeks on Wall Street, but also signals that potential investors are doing their homework and not just buying based on hype.
Jennifer Streaks does not own any of the stocks in this article. The Motley Fool owns shares of Facebook and McDonald's. Motley Fool newsletter services recommend Facebook and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
